Talking to Cristiano at the Metal Investor Forum
Yesterday I spent a fair amount of time talking to Cristiano, both about business and small talk. I'll start off saying that whether it was by design or it's just his style, but he seemed maybe a bit unprepared as there were no copies of the corporate presentation, nor were there any copies of the PFS summary for people to peruse over. The company banner was fairly plain jane, and even his presentation did not have the corporate slideshow on the projector, just the front page from the presentation, instead referring people to the slidesow presentation he did last year on youtube. All that aside he seemed to get a good amount of attention from investors.
The first thing I wanted addressed was current sales agreements. He admitted that their sales last year were a bit of a struggle, but they did make some sales to some very large farms and they are trying to product out in small portions of their fields, which is common when farmers change fertilizer products. Large farms ofter start with 1-2% of their fields for testing, then step it up gradually to 10-20-30% etc. He said he can do more deals with smaller farms but he would rather concentrate on the larger farms which could put massive orders in down the road after successful field trials. He told me, and during the presentation that market penetration will be a challenge and that first year or two of sales will be the hardest tons the company ever have to sell. However once farm gradually make larger orders for more % of their fields, there should be a snowballing effect.
I asked how common greensand projects were and was told that they arnt super common, especially ones of the scale and grade of Verde's. He is aware of some small deposits but doesnt consider them to be anything the company should be concerned about.
When asking why since Verde is founded in the UK, why there is no London listing. I cannot remember his answer, however, he said that there is a possibility of dual listing in London, Especially since the potash market is turning around and there is now the Sirius listed in London which has a is a large billion dollar company with a fertilizer deposit in England, there is growing awareness and interest fertilizer mining in London.
I asked what the corporate tax rate was in Brazil. He confirmed that it was 33% which is what I thought it was. Also in regards to share ownership, management owns 10%, and around 20% are held by some large individual investory. 70% retail investors. I asked if they would ever drill more to bring the indicated and inferred up to measure and I was told no. He thinks it would be a waste as even with the current measured, it would take 30 odd years to mine, and the deposite is so homogenous they pretty much know it there.
He went into details of their new hammer mill which will be located at the main road which is 20 km from the pit. SG will be trucked down to the mill crushed, put in 1 ton sack and put on trucks. If any large orders come in which would require another mill, there is a 4-5 month lead time to get another hammer mill installed onsite. Once phase three happens, which he said in an abdolute best case scenario would be 7-10 years old, he told me that the rail line would run up along side the road, and instead of using trucks to run SG from the pit to the mill, they would instead be using a very large conveyor belt.
While on the topic of phase 3, i ran some numbers by him 25MTA x $25/T and after tax we're looking at $420M USD per year. He nodded and smiled. I asked whether they would make more aquisitions or what they would be doing with the money. I was told their deposit is already too big for them, and that the majority of profits would be given back to shareholders in the form of dividends. He told me that dividents would begin much sooner than phase 3, although a smaller % of profit as they obviously are using profits to slowly build their expansions.
After my time meeting with Cristiano, I now know more details about the company and its CEO that I weren't aware of before. I come away from it feeling the same way about the company as I felt going in to meeting with him. The next couple years will be a challenge for the company as they make market penetration and prove that there is the demand for the product. Shareholders who are in now for this hard part, and add to their positions as the company proves that they can succeed in turning farms over to their product should be greatly rewarded. Given a current market cap of under $40CAD, and the potential for phase 3 annual dividends to be at least 10x the current market cap. I feel that this is definately one to hold (at least a portion of) for the haul.